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BLOG: CMD Canada’s Mark Casaletto on the economic outlook for construction in 2015

CMD Canada vice president and general manager Mark Casaletto spoke at the Independent Contractors and Businesses Association's CEO Breakfast at Buildex Vancouver on Feb. 25.

Casaletto began by pointing out that China is still the leader for construction output for the world at 36 per cent, with the United States second at 13 per cent.

Russia was third with four per cent, but Canada is the fourth biggest construction economy at three per cent.

One of the biggest factors affecting the Canadian economy is, and will be, the continuing U.S. economic recovery, Casaletto said.

But, falling oil prices are another major factor affecting the Canadian economy.

The U.S. has become self-sufficient for energy, which has created a supply/demand issue for the world oil economy.

It's very difficult to predict economic recovery when you can't predict oil prices and many different factors such as economic and political instability can affect the price, he added.

Oil prices will continue to be a problem in the short term and a number of large projects have been delayed. In addition, the loonie is dropping (which means stronger manufactured-goods export sales) and a reduced demand for Canadian good from the U.S. means less assured trade.

But, "We have a tremendous opportunity" in terms of resources, Casaletto said, and one of the challenges is that "we've gotten in our own way a little bit," he added.

The rest of the world has moved more quickly, he said, citing Australia as an example of the country that does not get bogged down in consultations and inquiries before going ahead with projects.

Other barriers to competitiveness include silos in skills development, entrepreneurs lacking capital for fast-growing companies and internal barriers to trade.

However, the fundamentals are in place for good growth, Casaletto said.

More than 25 per cent of exports from Canada are energy, with metals and minerals making up 16 per cent, and vehicles and parts making up 15 per cent.

But, the longer the price of oil and commodities stays down, the less able manufacturing will be able to offset that decline, Casaletto said.

The Canadian construction industry has changed radically in the past 10 years, and "the resource sector has fundamentally changed the dynamics," he said.

Projects disengage quickly, Casaletto said, but they re-engage just as quickly and in the long term, the resource sector will be a boom for construction.

Oil will move, if not by pipeline, then by rail, so there is a buildup in construction activity surrounding that infrastructure.

Infrastructure is top of mind, with efforts from all levels of government to improve it.

There was a dependence on resource revenue to improve infrastructure, but renewal will go ahead even without resource-based revenues.

The residential sector trendline is up, despite less houses and more densification due to condo construction in urban centres.

There are many jobs in the service sector and those jobs require offices.

There is low supply and high demand, so office vacancies are driving construction in major Canadian cities.

In the short-term, the economy is volatile, but in the long term construction is looking up, Casaletto concluded, and "it's a great industry to be in."

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